NECESSITY, FUNCTION, AND CONFORMITY:
The Cabinet for Health and Family Services, Office of the Kentucky Health
Benefit Exchange, has responsibility to administer the state-based American
Health Benefit Exchange. KRS 194A.050(1) requires the secretary of the cabinet
to promulgate administrative regulations necessary to protect, develop, and
maintain the health, personal dignity, integrity, and sufficiency of the
individual citizens of the Commonwealth; to operate the programs and fulfill
the responsibilities vested in the cabinet; and to implement programs mandated
by federal law or to qualify for the receipt of federal funds. This
administrative regulation establishes the policies and procedures relating to
the operation of a Small Business Health Options Program in accordance with 42
U.S.C. 18031 and 45 C.F.R. parts 155 and 156.

(6) "Department of Health and
Human Services" or "HHS" means the U.S. Department of Health and
Human Services.

(7) "Employer identification
number" means a unique numerical identifier
which is used to identify a business, partnership, or other entity.

(8) "Full-time
employee" is defined by 45 C.F.R. 155.20.

(9) "Full-time equivalent
employee" means the number of employees determined by using the method set
forth in section 4980H(c)(2) of the Internal Revenue Code, 26 U.S.C.
4980H(c)(2).

(10) "Group participation
rate" means the number of eligible employees enrolled in a group health
plan in relation to the number of employees eligible to enroll in the group
health plan.

(11) "Health plan" is defined
by 42 U.S.C. 18021(b)(1).

(12) "Indian" is defined by
25 U.S.C. 450b(d).

(13) "Initial open enrollment
period" means the period beginning October 1, 2013 and extending through
March 31, 2014, during which a qualified individual or qualified employee may
enroll in health coverage through an exchange for the 2014 benefit year.

(15) "Kentucky Health Insurance
Premium Payment Program" or "KHIPP" means a Kentucky Medicaid
program that pays the costs of some or all of the employee portion of employer-sponsored
health insurance premiums.

(16) "Medicaid" means
coverage in accordance with Title XIX of the Social Security Act, 42 U.S.C.
sections 1396 et seq. as amended.

(17) "Medicare advantage
plan" means a Medicare program established under 42 U.S.C. 1395w-21, which
provides Medicare Part A and B benefits through a private insurer.

(18) "Metal level of
coverage" means health care coverage provided within plus or minus two (2)
percentage points of the full actuarial value as follows:

(a) Bronze level with an actuarial
value of sixty (60) percent;

(b) Silver level with an actuarial
value of seventy (70) percent;

(c) Gold level with an actuarial value
of eighty (80) percent; and

(d) Platinum level with an actuarial
value of ninety (90) percent.

(19) "Minimum essential
coverage" is defined by 26 C.F.R. 1.5000A-2.

(20) "Plan year" means a
consecutive twelve (12) month period during which a health plan provides
coverage for health benefits.

(21) "Premium" is defined by
KRS 304.14-030.

(22) "Qualified employee"
means an individual employed by a qualified employer who has been offered
health insurance coverage by the qualified employer through the SHOP.

(23) "Qualified employer"
means an employer that elects to make, at a minimum, all full-time employees of
the employer eligible for one (1) or more QHPs in the small group market
offered through the SHOP.

(24) "Qualified Health Plan"
or "QHP" means a health plan that meets the standards described in 45
C.F.R. 156 Subpart C and that has in effect a certification issued by the
office.

(25) "Qualifying event" means
an event described in Section 9(1) of this administrative regulation.

(26) "Reference plan" means the selection of a single plan on which an employer will
base its contribution and employees are then able to elect other plans and pay
the premium differential.

(27) "Service
area" means a geographical area in which an issuer may offer a QHP.

(29) "SHOP" means a Small
Business Health Options Program operated by the KHBE through which a qualified
employer can provide a qualified employee and the employee's dependents with access
to one (1) or more QHPs.

(30) "Small employer" means
for a plan year beginning:

(a) Before January 1, 2016, an employer
who employed an average of fifty (50) or fewer full-time employees on business
days during the preceding calendar year; or

(b) On or after January 1, 2016, an
employer who employed an average of at least one (1) but no more than 100
full-time equivalent employees on business days during the preceding calendar
year and who employs at least one (1) employee on the first day of the plan
year.

(31) "Special enrollment
period" means a period during which a qualified employee who experiences
certain qualifying events may enroll in, or change enrollment in, a QHP through
the KHBE outside the initial and annual open enrollment periods.

(32) "TRICARE" means the Department of Defense administered health care program
serving active uniformed service members, retirees, and their families.

Section 2. Employer
Eligibility and Participation Requirements. (1) Beginning October 1, 2013, and
thereafter, a small employer may submit an application to purchase health
insurance coverage for its qualified employees through the SHOP if the employer
is a small employer that:

(a) Meets the requirements established
in 45 C.F.R. 155.710(b);

(b) Has a valid federal employer
identification number; and

(c) Has a group participation rate of
at least seventy five (75) percent in accordance with subsection (6) of this
section, except as provided in 45 C.F.R. 147.104(b)(1)(i).

(2) A small employer participating in
more than one (1) SHOP and meeting the criteria in subsection (1)(a) of this
section shall offer coverage to its employees whose primary work site is in Kentucky.

(3) A small employer shall submit Form
KHBE-E10, Small Business Health Options (SHOP) Insurance Application for
Employers, to participate in SHOP:

(a) Via the KHBE Web site at
www.kynect.ky.gov;

(b) By telephone by contacting the KHBE
customer service center;

(c) By mail; or

(d) In person.

(4) A qualified employer who ceases to
be a small employer solely by reason of an increase in the number of employees
shall be eligible to participate in the SHOP until the employer:

(a) Fails to otherwise meet the
eligibility criteria of this section; or

(b) Chooses to no longer purchase
health insurance coverage for qualified employees through the SHOP.

(5) As part of the verification of an
application of the employer, a small employer shall submit:

(a) An employee census that includes
the name, address, and social security number of all eligible employees;

(b) Proof of a federal employer
identification number; and

(c) Copy of its most recent Employer's
Quarterly Unemployment Wage and Tax Report, if applicable.

(6) A calculation of a group
participation rate shall not include in the count of eligible employees an
employee:

(b) Issued a certificate of exemption
from the shared responsibility payment by KHBE or HHS; or

(c) Not residing in the service area of
at least one (1) QHP offered by the employer.

(7) If a small employer’s group
participation rate falls below the requirement in subsection (1)(d) of this
section during a plan year, the qualified small employer shall be eligible to
participate in the SHOP through the remainder of the plan year.

(8) If the information submitted by a
small employer is inconsistent with the eligibility standards in this section,
the employer shall have thirty (30) days after a notification of the
inconsistency to present documentation to support the employer’s application or
resolve the inconsistency.

(9) A qualified small employer
participating in the SHOP shall:

(a) Disseminate information to its
qualified employees about the process to enroll in a QHP through the SHOP;

(b) Make a contribution toward the
premium of any qualified employee in accordance with Section 4 of this
administrative regulation;

(c) Remit to the KHBE, employer and
employee contributions upon receipt of an invoice from the KHBE; and

(d) Qualified employers participating
in the SHOP shall provide the KHBE with information about dependents or employees
whose eligibility status for coverage purchased through the employer in the
SHOP has changed.

(10) A small employer may designate an
agent to:

(a) Perform an employer function on
behalf of the employer; or

(b) Assist an employee with enrollment
and plan selection.

(11) A small employer participating in
a SHOP may be eligible for small employer health insurance tax credits in
accordance with 26 U.S.C. 45R.

Section 3. Employer Selection of
Qualified Health Plans. (1) A small employer shall make available to a
qualified employee:

(a) A single QHP;

(b) All available QHPs at a single
metal level of coverage; or

(c) If metal levels are contiguous, one
(1) or more QHPs at more than one (1) metal level of coverage.

(2) A qualified employer may apply for
coverage through the SHOP for its qualified employees at any time in a year.

(3) The employer’s plan year shall
consist of the twelve (12) month period beginning with the qualified employer’s
effective date of coverage.

Section 4. Minimum Contribution. (1) If
a small employer selects one (1) QHP to offer to a qualified employee in
accordance with Section 3 of this administrative regulation, the small employer
shall:

(a) Define a percentage contribution of
at least fifty (50) percent toward a premium for employee-only coverage under
the QHP, except as provided for in 45 C.F.R. 147.104(b)(1)(i); and

(b) Apply the employer contribution
determined in paragraph (a) of this subsection toward a QHP selected by the
employee.

(2) If a small employer selects more
than one (1) QHP to offer to a qualified employee in accordance with Section 3
of this administrative regulation, the small employer shall:

(a) Select a QHP to serve as a
reference plan on which a contribution shall be based;

(b) Make a percentage contribution of
at least fifty (50) percent toward a premium for employee-only coverage under
the reference plan; and

(c) Apply the employer contribution
determined in paragraph (b) of this subsection toward a QHP selected by the
employee.

(3) If a small employer elects to
provide dependent coverage, the small employer may make a contribution toward a
premium for dependent coverage.

Section 5. Annual Employer Election
Period. (1) On an annual basis, a small employer shall have a thirty (30) day
period prior to the completion of the employer’s plan year and before the
annual open enrollment to change the employer’s participation in the SHOP for
the next plan year.

(2) During the employer annual election
period, a small employer may change the:

(a) Method by which the qualified
employer makes QHPs available to qualified employees in accordance with Section
3 of this administrative regulation;

(b) Employer contribution towards the
premium of a qualified employee made in accordance with Section 4 of this
administrative regulation; and

(c) QHP or QHPs offered to qualified
employees in accordance with Section 3 of this administrative regulation.

Section 6. Employee Eligibility. (1) An
employee shall be eligible to enroll in a QHP through the SHOP if the employee
receives an offer of coverage from a qualified employer.

(2) An employee shall submit Form
KYBE-E11, Small Business Health Options (SHOP) Insurance Application for
Employees, to enroll in a QHP:

(a) Via the internet at
www.kynect.ky.gov;

(b) By telephone by calling the KHBE
customer service center;

(c) By mail; or

(d) In person.

(3) If the information submitted by an
employee is inconsistent with the eligibility standards in this section, the
employee shall have thirty (30) days after a notification of the inconsistency
to present documentation to support the employee’s application or resolve the inconsistency.

(4) A qualified employee may designate
an individual or organization as an authorized representative.

(5) An eligible employee who does not
want to enroll in a QHP offered by a qualified employer shall waive coverage.

(6) A small employer shall be notified
if a qualified employee enrolled in a QHP terminates coverage in the QHP.

Section 7. Enrollment and Effective
Dates of Coverage. (1) A qualified employee shall select a QHP or change a QHP
offered by a qualified employer in accordance with Section 3 of this administrative
regulation during:

(a) The initial open enrollment period;

(b) An annual open enrollment period as
set forth in Section 8 of this administrative regulation;

(c) A special enrollment period set
forth in Section 9 of this administrative regulation; or

(d) An enrollment period outside of the
employer’s open enrollment period as set forth in Section 8(3) of this
administrative regulation, for a qualified employee who is newly eligible.

(2) The length of an initial open
enrollment period and annual open enrollment period shall be:

(a) Thirty (30) days; and

(b) At the request of a small employer,
extended up to a maximum of fifteen (15) additional days.

(3) Coverage in a QHP shall be
effective:

(a)1. If plan selection is made prior
to December 15, 2013, during the initial open enrollment period, January 1,
2014;

2. If open enrollment ends between the
first and 15th day of any month, the first day of the following month; or

3. If open enrollment ends between the
16th and the last day of any month, the first day of the second following
month; and

(b) Upon receipt of the full first
month’s premium from a small employer.

(4) For a renewal, the effective date
of coverage shall be an employer’s annual renewal date.

(5) For a special enrollment period,
the effective date of coverage shall be in accordance with Section 9(5) and (6)
of this administrative regulation.

(6)(a) Except for the death of an
employee or dependent of an employee, the effective date for cancellation of
coverage shall be the last day of the month during which an issuer terminates
an employee’s or dependent of an employee’s coverage.

(b) The effective date for cancellation
of coverage for the death of an employee or dependent of an employee shall be
the date of death.

(7) Unless an
employee changes coverage due to a qualifying event, a premium shall not change
until the employer’s annual renewal date.

Section 8. Annual Open
Enrollment Period. (1) A qualified employee shall select a QHP or change QHPs
during an annual open enrollment period that shall be:

(a) No less than thirty (30) days; and

(b) Prior to the end of the employer’s
plan year.

(2) If a qualified employee enrolled in
a QHP remains eligible for coverage, the qualified employee shall remain
enrolled in the QHP selected the previous year unless:

(a) The qualified employee enrolls in
another QHP; or

(b) The QHP is no longer available to
the qualified employee.

(3)(a) A newly added employee who
becomes eligible after the beginning of the plan year and prior to the annual
enrollment period shall have thirty (30) days prior to the date the newly added
employee becomes eligible for employer-sponsored coverage to enroll in a QHP.

(b) The effective date of coverage of a
newly added employee shall be the first day of the month following the month
the newly added employee becomes eligible for employer-sponsored coverage.

Section 9. Special Enrollment Period.
(1) A qualified employee or dependent of a qualified employee may enroll in a
QHP or a qualified employee may change QHPs during a special enrollment period
if:

(b) The qualified employee gains a
dependent through marriage, birth, adoption, or placement for adoption;

(c) The qualified employee or dependent
of the qualified employee enrolls or fails to enroll in a QHP due to an error,
misrepresentation, or inaction of an officer, employee, or agent of the KHBE or
HHS;

(d) The qualified employee or dependent
of the qualified employee demonstrates to the KHBE that the QHP in which the
qualified employee or dependent of the qualified employee is enrolled substantially
violated a material provision of its contract in relation to the enrollee;

(e) The qualified employee or dependent
of the qualified employee gains access to new QHPs as a result of a permanent
move;

(f) The qualified employee or dependent
of the qualified employee demonstrates that the qualified employee or dependent
of an employee meets other exceptional circumstances;

(g) The qualified employee is an Indian
who may change from one (1) QHP to another QHP one (1) time per month;

(h) The qualified employee or dependent
of the qualified employee loses eligibility for coverage under Medicaid or
CHIP; or

(i) The qualified employee or dependent
of a qualified employee becomes eligible for premium assistance through KHIPP.

(2) A qualified employee or dependent
of a qualified employee shall have thirty (30) days from the date of a
triggering event described in subsection (1)(a) through (g) of this section to
select a QHP through the SHOP.

(3) A qualified employee or dependent
of a qualified employee shall have sixty (60) days from the date of a
triggering event described in subsection (1)(h) or (i) of this section to
select a QHP through the SHOP.

(4) A dependent of a qualified employee
shall not be eligible for a special enrollment period if a small employer does
not offer coverage to a dependent.

(5) Except as provided in subsection
(6) of this section, the effective date of coverage for an enrollment during a
special enrollment period shall be, if a qualified employee selects a QHP:

(a) Between the first and the fifteenth
day of any month, the first day of the following month; or

(b) Between the sixteenth and the last
day of any month, the first day of the second following month.

(6)(a) For a birth, adoption, or
placement for adoption, the effective date of coverage shall be the date of
birth, adoption, or placement for adoption.

(b) For a marriage, or if a qualified
employee loses minimum essential coverage as described in subsection (7) and
(8) of this section, the effective date of coverage shall be the first day of
the following month.

(7) Loss of minimum essential coverage shall
include those circumstances described in 26 C.F.R. 54.9801–6(a)(3)(i)
through (iii).

(8) Loss of minimum essential coverage shall
not include termination or loss due to:

(a) Failure to pay premiums on a timely
basis, including COBRA premiums prior to expiration of COBRA coverage; or